BUYING THAT BUSINESS

When it comes to buying a business, several options are available:

1. See if you can get the financing from the seller. Especially today, with less bank financing available, this is a great alternative. Keep in mind that although sellers want their asking price, they may be willing to give terms (i.e., lower interest rates, interest-free loans for a set time period) that over time can reduce the actual acquisition price.

2. Your bank probably will not give you 100 percent financing, but it may agree to a loan against the assets of the business being purchased as well as some security position against your own assets, such as real estate or investment security accounts.

3. Depending on the strength of the business and your other assets, financing from private equity groups may be an alternative means to access capital. However, this can prove to be expensive because most of these groups may want a guaranteed return or a 20 percent-plus annual return. Also, they may require majority ownership.

4. A private placement is another option. Millions can be raised this way. Participants could be partners or you could raise debt only, avoiding having other equity owners. While often more expensive than bank financing, this can be a viable way to raise capital without using your own assets. It depends on the strength of the business and if there are guarantees or warrants for the participants (if a debt offering) to get some upside value on the growth of the business. Having a good team of professionals to help structure the financials is essential with this option.

ROLLING IN STYLE

When buying a luxury automobile, investigate these financing possibilities:

1. If buying directly from a Rolls-Royce dealer, find out its costs and the leasing options the dealer offers.

2. Another leasing route is via a specialty car leasing company that deals with autos of this caliber. These often offer the best service, options and pricing.

3. Bank financing requires asking the institution you have the closest and deepest relationship with for a personal loan (interest-only if you want to save more cash flow).

What if it wants collateral? You could give a lien against some property (which could make the loan interest tax deductible, unlike a personal loan), remortgage some real estate, or take out a home equity loan against your house (again, possibly gaining a tax deduction).

Another lien option could be against a securities investment account or a stock position (while many execs cannot sell their company stock they can borrow against it). This would allow you to keep the income flow from the securities and possibly earn capital gains on their rise in value while creating investment interest that may be deducted against your investment income, thereby gaining a tax advantage for the loan.

Many ways are available to purchase what you wish without liquidating portfolio holdings or resorting to traditional financing. Your wealth advisor can help you determine which option is best for you while protecting your wealth and cash flow.